Buy Hindustan Unilever - TP Rs.550 - Geojit BNP Paribas

- Hindustan Unilever (HUL) has been upgraded to 'buy' from 'hold' rating earlier. Target price is Rs.550 and the stock is currently available in the range of Rs.480.

- Sector rotation, growth concerns and valuations have impacted Hindustan Unilever's share price performance significantly.

- Some growth challenges appear narrow and temporary in nature.

- It is expected that the secular trend of premiumisation supported by an improved innovation drive to deliver competitive growth rates for this company.

- Checks suggest the decline in modern trade growth is temporary and should improve, led by improved consumer confidence.

- It is expected that Hindustan Unilever's rural market growth rates to hold up, given healthy agriculturalgrowth trends and the company's intensive efforts to penetrate rural markets.

- The shares sold off sharply when volume growth slowed to 5% in 3QFY13 and royalties increased by 175bp. However, the sell off appears overdone.

- As it has multiple margin drivers, the impact on the EPS estimates is a marginal 4%.

- The TP of Rs.550 is at a 30 multiple of forward earnings and offers an upside potential of 15% from the current level.

Source : Equity Bulls

Keywords